Mr. Nishit Patel vs Manjulaben Mahdulal Karelia & Anr.

Ashok Bhushan, J.

This Appeal by a Suspended Director of the Corporate Debtor has been filed challenging order dated 20.04.2022 passed by National Company Law Tribunal, Court No.V, Mumbai Bench, admitting Section 7 Application filed by the Financial Creditor (Respondent herein).

The brief facts necessary to be noticed for deciding the Appeal are:

When the Appeal was heard on 01.11.2022, the learned Counsel for the Appellant prayed for time to file an additional affidavit seeking details of amount paid of Rs.10,01,16,474/- as reflected in the balance sheet of 2017-18. In response to the order dated 01.11.2022, an additional affidavit was filed by the Appellant dated 17.01.2023, to which affidavit in reply dated 25.02.2023 has also been filed by the Respondent.

We have heard Shri Krishnendu Datta, learned Senior Counsel for the Appellant and Shri Seeshan Hashmi, learned Counsel appearing for Financial Creditor.

The learned Counsel for the Appellant challenging the impugned order submits that no debt was due or payable as the Application was filed on 28.04.2020. The Application filed under Section 7 was premature. The Adjudicating Authority arrived at erroneous finding that there is acknowledge of liability of the Corporate Debtor in the balance sheet of 2017-18. The Loan Agreement is insufficiently stamped. The Loan Agreement is a fabricated document. The Loan Agreement contemplated that the Corporate Debtor would secure the loan by creation of mortgage. The Demand Notice mentions the loan as ‘unsecured loan’, whereas Information Utility Certificate mentions the loan as ‘secured loan’. It is submitted that amount of Rs.10,01,16,474/-which is reflected as long term borrowing in the balance sheet of 2017-18 is amount of loan, which was extended by M/s Romell Real Estates Pvt. Ltd. Hence, the said amount cannot be treated to be acknowledgement of any debt due to the Financial Creditor. The Appellant has brought on record the materials to indicate that amount of Rs.10 crores was paid by Romell Real Estates Pvt. Ltd. on the request of Corporate Debtor to one Mr. Vijay Kamdar between 29.07.2015 to 04.06.2016 and which loan amount having been paid at the request of the Corporate Debtor, there is no debt due to the Financial Creditor.

The learned Counsel for the Respondent (Financial Creditor) refuting the submissions of learned Counsel for the Appellant submits that the disbursement of loan of Rs.2 crores is not even denied by the Corporate Debtor, which is proved by the Bank statement filed along with Section 7 Application, which Bank statement from HDFC Bank, proves that disbursement of Rs.2 crores on 23.06.2010 was made to the Corporate Debtor by the Financial Creditor. It is submitted that the balance sheet for the year 2010-11, duly reflected the loan, where the name of Financial Creditor Manjulaben Karelia is also mentioned against the amount of Rs.2 crores. It is submitted that the balance sheets of the Corporate Debtor from 2010-11 to 2017-18 reflected the amount under the heading ‘Long term borrowing’, which was the loan extended by the Financial Creditor and her other family members and which loan was reflected in the balance sheets from year to year. The Share Purchase Agreement was executed by the then Directors of the Corporate Debtor in the year 2014. After Share Purchase Agreement by Romell Real Estates Pvt. Ltd. with the Corporate Debtor, the earlier Directors resigned and new Directors have come into place. Share Purchase Agreement also acknowledges the liability as existed by 31.03.2014. The submission of the Appellant that amount of Rs.10,01,16,474/- reflected in the balance sheet of 2016-17 and thereafter is the amount, which is a loan, which was extended by Romell Real Estates Pvt. Ltd. to the Corporate Debtor and does reflect the loan, which was extended by the Financial Creditor and her other family members is incorrect. In pursuance of the order dated 01.11.2022 passed by this Court to file relevant documents to prove that loan has been extended to the Corporate Debtor by the Romell Real Estates Pvt. Ltd., the Appellant has filed additional affidavit, where no document to prove that loan was extended by Romell Real Estates Pvt. Ltd. has been brought on the record. Only document which has been brought on the record are the letters signed by authorised representative of the Corporate Debtor from 29.07.2015 to 04.01.2016, under which request was made to the Romell Real Estates Pvt. Ltd. to make the payment of different amount to one Mr. Vijay Kamdar. The documents filed by the Appellant in support of the alleged loan by Romell Real Estates Pvt. Ltd. is wholly insufficient and Appellant has filed the letters, which does not prove any loan transaction between the Corporate Debtor and Romell Real Estates Pvt. Ltd. It is submitted that Respondent No.1 Financial Creditor has brought on the record the balance sheet of Romell Real Estates Pvt. Ltd. of the years 2015-16 and 2016-17, which do not refer to any long term or short term loan advanced to the Corporate Debtor, nor Vijay Kamdar has been mentioned as any creditor of the Romell Real Estates Pvt. Ltd.. The plea of the Appellant that amount of Rs.10,01,16,474/- is the loan given by Romell Real Estates Pvt. Ltd. is wholly false and incorrect. The said amount is nothing but long term borrowing, which included borrowing by the Financial Creditor with interest.

We have considered the submission of learned Counsel for the parties and haver perused the record.

The first question need to be considered is as to whether Financial Creditor has able to prove disbursement of loan to the Corporate Debtor. The Bank statement has been filed by the Financial Creditor, where disbursement of Rs.2 crores to the Corporate Debtor on 23.06.2010 is reflected. The Corporate Debtor in his reply at no point time had denied the disbursement. The immediate balance sheet after disbursement is balance sheet for the year 2010-2011, reflects the amount as unsecured loan. Unsecured loans are mentioned in two categories, i.e. (1) From Directors; and (2) From Others. It is useful to extract balance sheet as on 31.03.2011, which is filed by the Appellant himself in the Appeal. At page 77 of the paperbook, the balance sheet reads as under:

It is relevant to notice that against the name of the Financial Creditor Manjula Karelia amount mentioned on 31.03.2011 is as Rs.21,662,904 and further in the previous year, no amount was mentioned against Manjula Karelia, which clearly proves that amount reflected in the balance sheet included the interest, since disbursement was only of Rs.2 crores. At this juncture, we may also notice the balance sheets as on 31.03.2014. The balance sheet as on 31.03.2014 refer to long term borrowing of the current year as well as the previous year, which is as follows:

Note 4 of the same balance sheet divides long term borrowings in two categories, i.e., - (a) Loans and Advances from Related Parties; and (b) Other Loans and Advances, which Note 4 is as follows:

Share Purchase Agreement is dated 29.12.2014. The balance sheet as on 31.03.2015 is also on the record, in which with respect to long term borrowing amount of Rs.10,01,16,474 has been mentioned. Balance sheet as on 31.03.2015 continue long term borrowing, which is as follows:

It is relevant to notice that long term borrowings, which was reflected in the previous year, i.e. year ending as on 31.03.2014 was totaling to Rs.95,081,053/- and the said amount as on 31.03.2014 was shown as Rs.9,78,31,545/-, which amount is reflected in the balance sheet of 31.03.2015 as a previous year amount and the amount as on 31.03.2015 has been mentioned as Rs.10,01,16,474/- in the subsequent balance sheet, i.e. 2016-17 and 2017-18. The amount reflected in the balance sheet under the long term borrowings is the same amount i.e., Rs.10,01,16,474/-. In the Appeal, submission was advanced by the learned Counsel for the Appellant that the said amount of Rs.10,01,16,474/- is the amount, which was given by Romell Real Estates Pvt. Ltd. as loan and the balance sheet of the year 2015-16, 2016-17 and 2017-18, which reflects the said amount is the loan given by Romell Real Estates Pvt. Ltd. and Adjudicating Authority committed error in noticing the same as acknowledgement of debt by the Corporate Debtor. In view of the rival stand taken by the parties, this Tribunal on 01.11.2022, passed the following order:

By order dated 01.11.2022, the Appellant was directed to file relevant documents in support of the loan as claimed by the Appellant, which is advanced by the Romell. The Appellant filed affidavit dated 17.01.2023, where to explain the loan from Romell Real Estates Pvt. Ltd., they have stated that it is at the request of the Corporate Debtor, amount between 29.07.2015 to 04.01.2016 was paid by Romell Real Estates Pvt. Ltd. to Vijay Kamdar Paragraphs 2 and 3 of the affidavit are as follows:

In the affidavit, no documents have been placed by the Appellant to prove any loan or any disbursement made by Romell Real Estates Pvt. Ltd. to the Corporate Debtor. The submission that the payment was made on the letters given by Corporate Debtor to one Mr. Vijay Kamdar, is a loan transaction to the Corporate Debtor, does not inspire any confidence. The stand of the Appellant that amount of Rs.10,01,16,474/- is reflected in balance sheets of the year 2015-16, 2016-17 and 2017-18 is the loan given by Romell Real Estates Pvt. Ltd. is false plea, which is apparent from the balance sheets of the Corporate Debtor on record. We have noticed the balance sheet for the yar as on 31.03.2014, which balance sheet indicates that long term borrowing as on 31.03.2014 was Rs.9,78,31,545/-, which figure is reflected in balance sheet as on 31.03.2015. The balance sheet as on 31.03.2015 has noted the figures of Rs.10,01,16,474/-, which we have already extracted above. According to the Appellant, the amount of Rs.10 crore was paid by Romell Real Estates Pvt. Ltd. from 29.07.2015 to 04.01.2016 at the request of the Corporate Debtor. The figure of Rs.10,01,16,474/- already find place in balance sheet of 31.03.2015 by that time the alleged payment by Romell Real Estates Pvt. Ltd. was not even made. In the balance sheet of 2016-17 and 2017-18, the said figure of long term borrowing of Rs.10,01,16,474/- of the previous year and of the year ending 31.03.2017 has been mentioned. It is useful to extract the balance sheet as on 31.03.2017, which is as follows:

When the figure of Rs.10,01,16,474/- is continuing as long term borrowings from the balance sheet as on 31.03.2015 and which figure is the same figure, which is reflected in the balance sheet as on 31.03.2015, we fail to see how the loan of Romell Real Estates Pvt. Ltd. of Rs.10,01,16,474/- is reflected in the balance sheet. In event there is any amount of Rs.10,01,16,474/- loan advanced by Romell Real Estates Pvt. Ltd., the balance sheet ought to have reflected the same, in addition to Rs.10,01,16,474/-. Thus, the balance sheet of the Corporate Debtor itself makes it clear that the plea raised by the Appellant that the amount reflected in the balance sheet is not the amount, which was given by the Financial Creditor, rather it is the amount advanced by Romell Real Estates Pvt. Ltd., is false and misleading.

It is relevant to notice that in the present case, this Tribunal has directed the Appellant to file an affidavit and explain the entry of Rs.10,01,16,474. After the order of this Tribunal, an affidavit has been filed dated 17.01.2023, which is nothing but misleading affidavit containing false averments. We are satisfied that amount which was advanced to the Appellant by the Financial Creditor, was duly disbursed, which is proved by the Bank statement and is reflected in the balance sheet of 2010-11. The amount reflected in the balance sheet of year 2010-11 under the heading ‘long term borrowing’ have been increasing in subsequent years, which indicates that interest component was added in subsequent balance sheets, which fully supports the case of the Financial Creditor that loan was with interest @ 12%. We, thus, reject the plea of the Appellant that amount of Rs.10,01,16,474/-reflected in the balance sheet of 2016-17 and 2017-18 are amount which was given by loan to the Corporate Debtor by Romell Real Estates Pvt. Ltd., which is false and misleading plea.

What we have stated above, i.e., the Appellant has filed false affidavit, the appeal could be dismissed on this ground alone. However, since learned Counsel for the Appellant has made various other submissions in support of the Appeal, we proceed to examine the submissions made by the Appellant.

Learned Counsel for the Appellant submits that there is no acknowledgement in the balance sheet of the year 2017-18, since name of Respondent No.1 Financial Creditor is not reflected in the balance sheet, hence, there is no acknowledgement within the meaning of Section 18 of the Limitation Act and Adjudicating Authority committed error in reading the acknowledgement. The loan according to the Financial Creditor having been disbursed on 23.06.2010 and the Application having been filed on 20.04.2020, the same is barred by time.

The submission of the Appellant that Application is barred by time cannot be accepted. After disbursement of loan on 23.06.2010, there is continuance reflection of the debt in the balance sheet from 2011-12 onwards till 2017-18. The submission of the Appellant is that balance sheet of 2017-18 cannot be read as any acknowledgement, since the name of Respondent No.1 is not mentioned in the balance sheet as creditor, hence there is no acknowledgement. The submission cannot be accepted, in the balance sheet of 2011-12, name of the creditor along with the amount disbursed to them including Respondent No.1 have been reflected in the column ‘unsecured loans’ and are subsequently reflected in the balance sheet, which is clear from the extract of balance sheet as noted above. The mere fact that name of Respondent No.1 is not mentioned as creditor in subsequent balance sheet including the balance sheet of 2017-18 is of no consequence, since the name of Respondent No.1 was mentioned as under the unsecured/ long term borrowings in 2011-12, which unsecured loan/ borrowings continued to be reflected in subsequent balance sheet of the Corporate Debtor. We have already noted the plea raised by the Appellant that amount of long term borrowings mentioned in balance sheet for the year 2017-18 is borrowing from Romell Real Estates Pvt. Ltd., which plea has not been accepted for reasons given above. We are satisfied that debt, which was reflected in 2011-12 of the Financial Creditor, continued to be reflected under the long term borrowing and there being continuous acknowledgement, the Application cannot be said to be barred by time.

The learned Counsel for the Appellant has relied on the judgment of the Hon’ble Supreme Court in Babulal Vardharji Gurjar vs. Veer Gurjar Aluminium Industry Pvt. Ltd. & Anr. – (2020) 15 SCC 1. The Hon’ble Supreme Court in the above case has laid down that acknowledgement under Section 18 of the Limitation Act provided for extension of limitation. In paragraph 35, following has been laid down:

We already having held that in the balance sheet, acknowledgement of debt for the Financial Creditor was reflected continuously from 2010-11 till 2017-18 and the Application, which was filed on 22.04.2020, cannot be held to be barred by time.

Learned Counsel for the Appellant further submitted that Application filed under Section 7 was premature. When one of the submissions of the Appellant is that Application was barred by time, we cannot accept the submission of the Appellant that Application was premature. The submission that Application is premature, is advanced on the basis of Loan Agreement dated 31.12.2010. The learned Counsel for the Appellant referred to Clause 4 of the Loan Agreement, to contend that loan was repayable only after 10 years, hence, the application was premature. The Appellant before the Adjudicating Authority has come with the categorical pleading that Loan Agreement dated 31.12.2010 is a manufactured document, which pleadings have been made in the reply filed by the Corporate Debtor to Section 7 Application. In paragraph 7 of the reply affidavit, the Corporate Debtor has made following pleadings:

When the Corporate Debtor’s case is that the Loan Agreement is fabricated and forged, it does not lie in the mouth of the Corporate Debtor to contend that as per Loan Agreement, the Application under Section 7 was premature. We further notice Clauses 4 and 5 of the Loan Agreement, on which the Appellant has placed reliance, which are as follows:

Clauses 4 and 5 mentions that outstanding principal amount will be repayable along with interest on the expiry of 10 years from the date of first disbursement of the loan, which was explained in bracketed portion, which reads as “(i.e. 10 years from 23rd June 2010 i.e. on or before 23rd June 2020)”. Clause 5 also indicate that the Borrower has right to repay the loan in first five years, i.e. till 23^rd June 2015. The above Clauses 4 and 5 when read together, makes it clear that loan could have been repaid by borrower before 23.06.2020 also. A Bank statement has also been brought on the record by the Appellant indicating that payment has been made by the Corporate Debtor to other family members of Respondent No.1 in the year 2015. We, thus, are not persuaded to accept the submission of the Appellant that Application filed under Section 7 of the Corporate Debtor was premature.

Learned Counsel for the Appellant has relied on the judgment of this Tribunal in Hyline Mediconz P. Ltd. vs. Anandaloke Medical Centre P. Ltd. – (2022) SCC OnLine 4286, where this Tribunal held that relevant point for determination of maintainability of the Application under Section 7 is the date of filing. Further reliance has been placed on the judgment of the Hon’ble Supreme Court in Ramesh Kymal vs. Siemens Gamesa Renewable Power Pvt. Ltd. – (2021) 3 SCC 224 and stated that the case of the Financial Creditor has to be tested on its pleadings in the Form and cannot be allowed to prevaricate from the same. There can be no quarrel to the proposition laid down in the above cases. In Section 7 Application, which was filed by the Financial Creditor, the amount in default and date of default was mentioned as 18.12.2019. The repayment letter dated 18.12.2019 sent by Respondent No.1 to Corporate Debtor was also filed along with Section 7 Application, by which Financial Creditor demanded the repayment of the amount within 15 days and the principal amount along with interest was mentioned as Rs.3,25,22,787/-. The Appellant has in the Section 7 Application clearly pleaded about the Loan Agreement dated 31.12.2010 and the issuance of repayment notice. In the rejoinder affidavit filed by the Financial Creditor, the balance sheets of the Corporate Debtor were also brought on the record.

From the facts of the present case, as reflected from materials brought on the record, it is clear that the Corporate Debtor, who has not denied the disbursement of the amount in balance sheet of 2010-11 and subsequent balance sheet has not made any pleading or brought on record any material that amount at any time was paid to the Financial Creditor, although some repayment was made to the other family members of the Financial Creditor in 2015. Disbursement, reflection in the balance sheets and repayment to family members, who were part of the same Loan Agreement, are the materials on which conclusion can be drawn that loan was taken by the Corporate Debtor, but was not repaid and now the Appellant is making false and misleading pleas to somehow get out from the liability from the debt and default, which has been committed by the Corporate Debtor. We, thus, are of the view that this Appeal deserved to be dismissed. Ordered accordingly. While dismissing the Appeal, we also impose cost on Appellant of Rs.1,00,000/- (Rupees one lakh) to be paid within four weeks to the Respondent No.1, in the facts and circumstances of the case specially keeping in view the Appellant’s attempt of filing false and misleading affidavits in the Appeal.